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Until the late 1960s computers—large and expensive mainframe computers, machines in specially air-conditioned computer rooms—were leased to customers rather than sold.[3][4] Service and all software available were usually supplied by manufacturers without separate charge until 1969. Computer vendors usually provided the source code for installed software to customers.[citation needed] Customers who developed software often made it available to others without charge.[5] Closed source means computer programs whose source code is not published. It is available to be edited only by the organization that developed it.

Starting in February 1983 IBM adopted an "object-code-only" model for a growing list of their software and stopped shipping source code.[11][12]

In 1983, binary software became copyrightable in the United States as well by the Apple vs. Franklin law decision,[13] before which only source code was copyrightable.[14] Additionally, the growing availability of millions of computers based on the same microprocessor architecture created for the first time an unfragmented and big enough market for binary distributed software.[15]

Since license agreements do not override applicable copyright law or contract law, provisions in conflict with applicable law are not enforceable.[21] Some software is specifically licensed and not sold, in order to avoid limitations of copyright such as the first-sale doctrine.[22]

While most proprietary software is distributed without the source code, some vendors distribute the source code or otherwise make it available to customers. For example, users who have purchased a license for the Internet forum software vBulletin can modify the source for their own site but cannot redistribute it. This is true for many web applications, which must be in source code form when being run by a web server. The source code is covered by a non-disclosure agreement or a license that allows, for example, study and modification, but not redistribution.[citation needed] The text-based email client Pine and certain implementations of Secure Shell are distributed with proprietary licenses that make the source code available.[citation needed]

Some governments fear that proprietary software may include defects or malicious features which would compromise sensitive information. In 2003 Microsoft established a Government Security Program (GSP) to allow governments to view source code and Microsoft security documentation, of which the Chinese government was an early participant.[28][29] The program is part of Microsoft's broader Shared Source Initiative which provides source code access for some products. The Reference Source License (Ms-RSL) and Limited Public License (Ms-LPL) are proprietary software licenses where the source code is made available.

Governments have also been accused of adding such malware to software themselves. According to documents released by Edward Snowden, the NSA has used covert partnerships with software companies to make commercial encryption software exploitable to eavesdropping, or to insert backdoors.[30][31]

Proprietary software vendors can prohibit the users from sharing the software with others. Another unique license is required for another party to use the software.

In the case of proprietary software with source code available, the vendor may also prohibit customers from distributing their modifications to the source code.

Shareware is closed-source software whose owner encourages redistribution at no cost, but which the user sometimes must pay to use after a trial period. The fee usually allows use by a single user or computer. In some cases, software features are restricted during or after the trial period, a practice sometimes called crippleware.

The European Commission, in its March 24, 2004 decision on Microsoft's business practices,[34] quotes, in paragraph 463, Microsoft general manager for C++ development Aaron Contorer as stating in a February 21, 1997 internal Microsoft memo drafted for Bill Gates:

The Windows API is so broad, so deep, and so functional that most ISVs would be crazy not to use it. And it is so deeply embedded in the source code of many Windows apps that there is a huge switching cost to using a different operating system instead.

Early versions of the iPhone SDK were covered by a non-disclosure agreement. The agreement forbade independent developers from discussing the content of the interfaces. Apple discontinued the NDA in October 2008.[35]

Proprietary software may also have licensing terms that limit the usage of that software to a specific set of hardware. Apple has such a licensing model for macOS, an operating system which is limited to Apple hardware, both by licensing and various design decisions. This licensing model has been affirmed by the United States Court of Appeals.[37]

Proprietary software which is no longer marketed, supported or sold by its owner is called abandonware, the digital form of orphaned works. If the proprietor of a software package should cease to exist, or decide to cease or limit production or support for a proprietary software package, recipients and users of the package may have no recourse if problems are found with the software. Proprietors can fail to improve and support software because of business problems.[38] Support for older or existing versions of a software package may be ended to force users to upgrade and pay for newer versions[39] (planned obsolescence). Sometimes another vendor or a software's community themselves can provide support for the software, or the users can migrate to either competing systems with longer support life cycles or to FOSS-based systems.[40]

synonymous with commercial software,[45][46] although the two terms are sometimes used synonymously in articles about free software.[47][48] Proprietary software can be distributed at no cost or for a fee, and free software can be distributed at no cost or for a fee.[49] The difference is that whether or not proprietary software can be distributed, and what the fee would be, is at the proprietor's discretion. With free software, anyone who has a copy can decide whether, and how much, to charge for a copy or related services.[50]

Proponents of commercial proprietary software argue that requiring users to pay for software as a product increases funding or time available for the research and development of software. For example, Microsoft says that per-copy fees maximise the profitability of software development.[51]

Software distributions considered as proprietary may in fact incorporate a "mixed source" model including both free and non-free software in the same distribution.[53] Most if not all so-called proprietary UNIX distributions are mixed source software, bundling open-source components like BIND, Sendmail, X Window System, DHCP, and others along with a purely proprietary kernel and system utilities.[54][55]

Some free software packages are also simultaneously available under proprietary terms. Examples include MySQL, Sendmail and ssh. The original copyright holders for a work of free software, even copyleft free software, can use dual-licensing to allow themselves or others to redistribute proprietary versions. Non-copyleft free software (i.e. software distributed under a permissive free software license or released to the public domain) allows anyone to make proprietary redistributions.[56][57] Free software that depends on proprietary software is considered "trapped" by the Free Software Foundation. This includes software written only for Microsoft Windows,[58] or software that could only run on Java, before it became free software.[59]

^Ceruzzi, Paul E. (2003). A History of Modern Computing. Cambridge, MA: MIT Press. p. 128. ISBN0-262-53203-4. Although IBM agreed to sell its machines as part of a Consent Decree effective January 1956, leasing continued to be its preferred way of doing business.then everyone started fighting

^"The History of Equipment Leasing", Lease Genie, n.d., archived from the original on April 11, 2008, retrieved November 12, 2010, In the 1960s, IBM and Xerox recognized that substantial sums could be made from the financing of their equipment. The leasing of computer and office equipment that occurred then was a significant contribution to leasings [sic] growth, since many companies were exposed to equipment leasing for the first time when they leased such equipment.

^IBM (n.d.). "Chronological History of IBM: 1960s". Retrieved May 28, 2016. Rather than offer hardware, services and software exclusively in packages, marketers 'unbundled' the components and offered them for sale individually. Unbundling gave birth to the multibillion-dollar software and services industries, of which IBM is today a world leader.

^Gallant, John (1985-03-18). "IBM policy draws fire - Users say source code rules hamper change". Computerworld. Retrieved 2015-12-27. While IBM's policy of withholding source code for selected software products has already marked its second anniversary, users are only now beginning to cope with the impact of that decision. But whether or not the advent of object-code-only products has affected their day-to-day DP operations, some users remain angry about IBM's decision. Announced in February 1983, IBM's object-code-only policy has been applied to a growing list of Big Blue system software products

^Landley, Rob (2009-05-23). "23-05-2009". landley.net. Retrieved 2015-12-02. So if open source used to be the norm back in the 1960's and 70's, how did this _change_? Where did proprietary software come from, and when, and how? How did Richard Stallman's little utopia at the MIT AI lab crumble and force him out into the wilderness to try to rebuild it? Two things changed in the early 80's: the exponentially growing installed base of microcomputer hardware reached critical mass around 1980, and a legal decision altered copyright law to cover binaries in 1983. Increasing volume: The microprocessor creates millions of identical computers

^Cite error: The named reference landley was invoked but never defined (see the help page).

^Daniel A. Tysver (2008-11-23). "Why Protect Software Through Patents". Bitlaw.com. Retrieved 2009-06-03. In connection with software, an issued patent may prevent others from utilizing a certain algorithm (such as the GIF image compression algorithm) without permission, or may prevent others from creating software programs that perform a function in a certain way. In connection with computer software, copyright law can be used to prevent the total duplication of a software program, as well as the copying of a portion of software code.

^Donovan, S. (1994). "Patent, copyright and trade secret protection for software". IEEE Potentials. 13 (3): 20. doi:10.1109/45.310923. Essentially there are only three ways to protect computer software under the law: patent it, register a copyright for it, or keep it as a trade secret.

^Eben Moglen (2005-02-12). "Why the FSF gets copyright assignments from contributors". Retrieved 2017-05-01. Under US copyright law, which is the law under which most free software programs have historically been first published, [...] only the copyright holder or someone having assignment of the copyright can enforce the license.

^Microsoft Corporation (2005-04-01). "End-User License Agreement for Microsoft Software: Microsoft Windows XP Professional Edition Service Pack 2"(PDF). p. Page 1. Retrieved 2009-04-29. You may install, use, access, display and run one copy of the Software on a single computer, such as a workstation, terminal or other device (“Workstation Computer”). The Software may not be used by more than two (2) processors at any one time on any single Workstation Computer. ... You may permit a maximum of ten (10) computers or other electronic devices (each a 'Device') to connect to the Workstation Computer to utilize one or more of the following services of the Software: File Services, Print Services, Internet Information Services, Internet Connection Sharing and telephony services.

^Tony Patton (2008-11-21). "Protect your JavaScript with obfuscation". Retrieved 2009-06-12. While the Web promotes the sharing of such code, there are times when you or a client may not want to share their JavaScript code. This may be due to the sensitive nature of data within the code, proprietary calculations, or any other scenario.

^The Linux Information Project (2006-04-29). "Vendor Lock-in Definition". Retrieved 2009-06-11. Vendor lock-in, or just lock-in, is the situation in which customers are dependent on a single manufacturer or supplier for some product [...] This dependency is typically a result of standards that are controlled by the vendor [...] It can grant the vendor some extent of monopoly power [...] The best way for an organization to avoid becoming a victim of vendor lock-in is to use products that conform to free, industry-wide standards. Free standards are those that can be used by anyone and are not controlled by a single company. In the case of computers, this can usually be accomplished by using free software rather than proprietary software (i.e., commercial software).

^Bell, John (October 1, 2009). "Opening the Source of Art". Technology Innovation Management Review. Archived from the original on March 30, 2014. Retrieved December 30, 2012. [...]that no further patches to the title would be forthcoming. The community was predictably upset. Instead of giving up on the game, users decided that if Activision wasn't going to fix the bugs, they would. They wanted to save the game by getting Activision to open the source so it could be kept alive beyond the point where Activision lost interest. With some help from members of the development team that were active on fan forums, they were eventually able to convince Activision to release Call to Power II's source code in October of 2003.

^Wen, Howard (June 10, 2004). "Keeping the Myths Alive". linuxdevcenter.com. Archived from the original on April 6, 2013. Retrieved December 22, 2012. [...]fans of the Myth trilogy have taken this idea a step further: they have official access to the source code for the Myth games. Organized under the name MythDevelopers, this all-volunteer group of programmers, artists, and other talented people devote their time to improving and supporting further development of the Myth game series.

^Largent, Andy (October 8, 2003). "Homeworld Source Code Released". www.insidemacgames.com. Archived from the original on October 12, 2013. Retrieved November 24, 2012. With the release of Homeworld 2 for the PC, Relic Entertainment has decided to give back to their impressive fan community by releasing the source code to the original Homeworld.

^ZDaemonStarting with the 1.07 release in July 2005, the ZDaemon project does not make the source code available anymore and has remained closed source from that point forward

^Havoc Pennington (2008-03-02). "Debian Tutorial". Retrieved 2009-06-04. It is important to distinguish commercial software from proprietary software. Proprietary software is non-free software, while commercial software is software sold for money.

^Michael K. Johnson (1996-09-01). "Licenses and Copyright". Retrieved 2009-06-16. If you program for Linux, you do need to understand licensing, no matter if you are writing free software or commercial software.

^Eric S. Raymond (2003-12-29). "Proprietary, Jargon File". Retrieved 2009-06-12. Proprietary software should be distinguished from commercial software. It is possible for software to be commercial [...] without being proprietary. The reverse is also possible, for example in binary-only freeware.